As millions of Americans were forced out of work because of the coronavirus pandemic, many turned to unemployment so they could pay their bills. Early on, states had a hard time handling the massive influx of requests, leading to long waits and confusion for many people.

As states struggled to upgrade their decades-old computer equipment, they also faced another problem. Fraudsters and scammers were taking advantage of the chaos to bilk taxpayers out of money meant to help people. According to NBC News, federal officials estimate that criminals have illegally obtained millions of dollars, mostly by exploiting the federal Pandemic Unemployment Assistance program.

While the program, which was included in the CARES Act, allows independent contractors and self-employed individuals to apply for benefits, it also created a loophole for fraudsters to exploit. The applicants were required to provide proof of income, but verifying if those figures are accurate is nearly impossible. In addition, beneficiaries could receive up to $172 per week without submitting any paperwork to prove their income.

Some scammers submitted false claims using falsified receipts, while others stole people's personal information and used it to apply for benefits.

The Secret Service has launched over 500 fraud investigations in 40 states.

"It's very rampant," David Smith, the agent in charge of the investigation, told NBC News. "Criminals knew the priority was to get that money into the hands of Americans sooner than later. So they just jumped on an opportunity."

The biggest case of fraud so far originated in Colorado. Officials noticed a huge spike of applications for the program in July and discovered that 75% of the claims were fraudulent. They implemented new security features and detected an additional 50,000 fraudulent claims worth $1 billion. State officials said the fraudsters got away with about $40 million before the scam was noticed.

"These aren't individuals who happen to be filing one or two claims. These are schemes that have figured out ways to get into the system and override security systems that are in place," said Joe Barela, executive director of the Colorado Department of Labor and Employment.

In Pennsylvania, authorities uncovered a scheme involving 10,000 inmates. The inmates used their information to apply for benefits and had the money sent to contacts outside of the prison. Officials said they made off with about $10,000 each, costing taxpayers around $100 million.

"The pandemic did not create any new criminals. It just created an environment for criminals to exploit," Smith said. "The same people who were involved in romance scams and employment scams six months, eight months, two years ago — they're now using the pandemic as an opportunity to victimize Americans."

Photo: Getty Images

Ross MacLeod

About Ross MacLeod